chapter 17 solution

CHAPTER 17

CHAPTER 17GOVERNMENTAL ENTITIES: INTRODUCTION AND GENERAL FUND ACCOUNTINGANSWERS TO QUESTIONSQ17-1A fund is an independent fiscal and accounting entity with a self-balancing set of accounts recording cash and/or other resources together with all related liabilities, obligations, reserves, and equities which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations. A fund may receive resources from a variety of sources, including collection of taxes on property, income, or commercial sales; receipt of grants, fines, or licenses; and collection of service charges.

Q17-2The eleven funds generally used by local and state governments are:

Governmental

a. General fund

b. Special revenue fund

c. Capital projects fund

d. Debt service fund

e. Permanent fund

Proprietary

f. Internal service fund

g. Enterprise fund

Fiduciary

h. Pension trust fund

i. Investment trust fund

j. Private-purpose trust fund

k. Agency funds

The purpose of each fund is individually discussed below:

a.General fund: All financial resources except those required to be accounted for in another fund are accounted for in the general fund.

b.Special revenue fund: The proceeds of specific revenue sources that are legally restricted for specified purposes are accounted for in the special revenue fund.

c.Capital projects fund: Financial resources to be used for the acquisition or construction of major capital projects that will benefit a large population are accounted for in the capital projects fund.

d. Debt service fund: The accumulation of resources for, and the payment of, general long-term debt principal and interest are accounted for in the debt service fund.

e.Permanent fund: Accounts for resources for which the principal must be maintained, but for which the earnings may be used in support of governmental programs.

f.Internal service fund: The financing of goods or services provided by one department or agency to other departments or agencies of the governmental unit, or to other governmental units, are accounted for in internal service funds.

g.Enterprise fund: Operations of governmental units that charge for services provided to the general public are accounted for in the enterprise funds.

h.Pension trust fund: Resources held by a governmental unit in a trustee capacity for the members and beneficiaries of pension plans, postemployment plans, or other employee benefit plans.

i.Investment trust funds: Accounts for the external portion of investment pools of governing units.

j.Private-purpose trust fund: Accounts for trust arrangements under which both principal and interest may be used to benefit specific individuals, private organizations, or other governmental units. Note that these resources have specific purposes as stated by the donor or grantor, and are not available for general governmental programs.

k.Agency funds: Assets held by a governmental unit in an agency capacity for employees or other individuals are accounted for in agency funds.

Q17-3The modified accrual basis includes some aspects of accrual accounting and some aspects of cash-basis accounting. Under the modified accrual basis, the emphasis is on reporting how well the government performed by focusing on when the revenue and expenditures are recognized in the accounts and reported in the financial statements. The emphasis is not on how much was earned nor on the amount of expenses.

Q17-4The modified accrual basis is used for funds for which expendability is the concern because the governing entity is interested in the determination of the resources still remaining to be expended to carry out the objectives of the fund.

Q17-5Property taxes are recognized as revenue in the general fund when the taxes are levied, provided they apply to and are collectible within the current fiscal period, or within a short period (< 60 days) after the end of the fiscal period.

Q17-6GASB 33 states that taxpayer-assessed income and sales taxes should be accrued in the general fund when they become both measurable and available to finance expenditures of the fiscal period. Sales taxes held by other governmental units should be recognized if the taxes are both measurable and available for expenditure. Measurability in this case is based on an estimate of the sales taxes to be received, and availability is based on the ability of the governing entity that will receive the future distribution to obtain current resources through credit by using future sales tax receipts as collateral for the loan.

Q17-7 Budgetary accounting is the entering of the budgeted revenue, appropriations, and net increase or decrease in fund balance into the formal accounting records as a formal accounting control mechanism. Expected revenue is accounted for as estimated revenue, an anticipatory asset account. The governmental unit anticipates receiving resources from the revenue sources listed in the budget. Anticipated expenditures are accounted for as appropriations, an anticipatory liability account. The governmental unit anticipates incurring liabilities for the budgeted amount. Both the expected revenue and the appropriations accounts are closed at the end of the fiscal period.

Q17-8All expenditures are not encumbered. Payroll costs and other costs for goods received from within the governmental entity are not encumbered because these are normal and recurring costs.

Q17-9Some governmental units do not report small amounts of inventories of supplies in their balance sheets because the amount of inventory is not material.

Q17-10 Under the lapsing method the Reserve for Encumbrances account is shown as a reservation of the fund balance on the fiscal year-end balance sheet. The encumbrance account is a nominal account that is closed at the end of the fiscal period. The net effect is to close out the remaining encumbrances against the unreserved fund balance. Alternatively, the GASB does allow for just footnote disclosure of the lapsing open orders at year-end that are expected to be honored in the next fiscal period.

Under the nonlapsing method the expenditure authority from prior periods is carried over as nonlapsing encumbrances. The budget for the next fiscal period does not show these carryovers and is more realistic for situations in which orders placed with outside vendors cannot easily be canceled. The encumbrance account is still closed at the end of the period and the reserve for encumbrances is canceled.

When accounting for the actual expenditure in the subsequent year, the lapsing method requires the new governing board to decide if it will honor the outstanding encumbrances for the previous year by including them in the current budgeted appropriations. If the governing board accepts the obligation to honor their outstanding purchase order by including the expenditure within its budget, the entries made at the end of the previous year are reversed to re-establish the expenditure authority and the normal encumbrance/expenditure entries are made. In the event the new governing board decides not to honor the outstanding encumbrances, the reserve for

outstanding encumbrances is eliminated and the order for the goods is canceled with the external vendor.

When accounting for the actual expenditure in the subsequent year, the nonlapsing method separates expenditures made from spending authority carried over from prior periods. This is done in a reclassification entry made on the first day of the next fiscal period, which dates the reserve for encumbrances. There is no entry to reverse the encumbrance because the encumbrance account was closed in the previous period and no longer exists for this expenditure.

Q17-11The expenditure for inventories is recognized in the period the supplies are acquired under the purchase method. Under the consumption method, the expenditure for inventories is recognized for only the amount of inventory used in the period.

Q17-12 Interfund services provided and used are interfund activities that would be treated as revenues or expenditures if they were made with parties external to the governmental entity. An example would be if the general fund purchased supplies from the internal service

Interfund transfers out or in are transfers of resources between funds. An example would be a transfer of resources from the general fund (an interfund transfer out) to the capital projects fund (a transfer in) to assist in the construction costs of a new municipal building.

Q17-13An interfund transfer is reported as "Other Financing Sources or Uses" in the general fund's statement of revenue, expenditures, and changes in fund balance.

Q17-14The loan of $2,000 from the general fund to the enterprise fund is reported on the financial statements of the general fund on the balance sheet as a receivable. The loan is not shown on the fund's statement of revenue, expenditures, and changes in fund balance.

Q17-15Governmental accounting places many controls over expenditures, and much of the financial reporting focuses on the various aspects of an expenditure. An expenditure can be made for a function of the governmental entity or an activity within a function. Expenditures for an activity can be classified by object, which is the type of expenditure. The extensive detail required to account for and cross reference an expenditure to ensure it is properly classified at all levels requires a very comprehensive accounting system.

SOLUTIONS TO CASES

C17-1 Budget Theorya.A governmental accounting system must make it possible to:

1.Present fairly and with full disclosure, in conformity with generally accepted accounting principles, the financial position and results of financial operations of the funds and account groups of the governmental unit.

2.Determine and demonstrate compliance with finance-related legal and contractual provisions.

Because the legislative body enacts the budget into law, the budget is recorded in the accounts of a governmental unit. This enables a governmental unit to show legal compliance with the budget by providing an accounting system that measures actual expenditures and obligations against amounts appropriated, and actual revenue against estimated revenue. Appropriations enacted into law constitute maximum expenditure authorizations during the fiscal year, and they cannot legally be exceeded unless subsequently amended by the legislative body.

b.As the new fiscal year begins, the budget, already enacted into law by the legislative body, is recorded. Budgetary accounts are set up to record the estimated revenue and appropriations in the fund accounts by debiting estimated revenue and crediting appropriations. If there is a difference between estimated revenue and appropriations, the excess or deficit is credited or debited, respectively, to fund balance. In addition, subsidiary ledger accounts are maintained for estimated revenue by source and for appropriation/expenditure items.

At the end of the fiscal year, the estimated revenue balance and the appropriations balance are closed out to fund balance.

C17-2 Municipal versus Financial Accountinga.The most significant difference in purpose between municipal accounting and commercial accounting is that commercial enterprises are operated for profit, which places much emphasis on the proper determination of periodic earnings. Governmental units are primarily concerned with providing services to their citizens at minimum cost and reporting on the stewardship of public officials with respect to public funds, which places much emphasis on budgetary controls. However, some municipal units perform commercial services that are generally secondary to their tax-financed primary services.

Another difference in accounting purpose is that municipal accounting operations are controlled by legal provisions in constitutions, charters, and regulations having the force and effect of law. Because of these legal provisions and the diversity of its governmental operations, a municipality cannot use a single, unified set of accounts for recording and summarizing all financial transactions. If there is a conflict between legal provisions and generally accepted accounting principles applicable to governmental units, legal provisions should take precedence to the extent that the accounting system must enable the ready disclosure of compliance. However, for financial reporting purposes, generally accepted accounting principles must take precedence. Commercial enterprises usually are not controlled by charters that are restrictive; therefore, their accounting systems are designed differently.

Legislative action may limit the use of certain tax revenue for expenditure on particular programs, the methods of tax collection, or the rates of tax assessment. Such provisions must be reflected in the accounting system and be appropriately disclosed in the municipality's financial statements as a report on the stewardship of public officials with respect to public funds.

In governmental accounting all required accounts are organized on the basis of funds, each of which is independent of the other. Each fund must be so accounted for that the identity of its resources, obligations, revenue, expenditures, and fund balance is continually maintained. These purposes are accomplished by providing a complete self-balancing set of accounts for each fund.

The basis of accounting for the reporting on governmental units is often different from that used by commercial enterprises. For example, the accrual basis of accounting is recommended for all funds except the general, special revenue, debt service, capital projects, agency, and expendable trust funds. These funds should be accounted for by the modified accrual basis. The modified accrual basis is recommended for these funds because some of their revenue sources are difficult to measure in advance and frequently become available only a short time before cash receipt.

C17-2 (continued)

Generally, fair presentation of financial position and results of operations in conformity with generally accepted accounting principles requires that the financial statements of expendable funds (those that use the modified accrual basis) include a balance sheet and a statement of revenue, expenditures, and changes in fund balance. In contrast, however, a commercial enterprise would usually prepare a statement of financial position, an earnings statement, a statement of retained earnings, and a statement of cash flows. The statement of revenue and expenditures of the general fund and certain special revenue funds should include a comparison with a formal budget in order to conform with generally accepted accounting principles; there is no such requirement for a commercial enterprise.

b.Inventories are often ignored in governmental accounting because of an emphasis on budgeting revenue against outlays without looking behind the outlays to determine the extent to which they represent actual usage or consumption. Put another way, there is an emphasis on the cash or fiscal aspects rather than the operational aspects. This is easy to understand when one considers that general-fund expenditures for firemen's salaries and for the purchase of a new fire truck are accounted for in the same way.

However, inventories are not wholly ignored in governmental accounting. In those funds in which accounting parallels commercial accounting practice, such as enterprise funds, inventories are taken into consideration. Similarly, in an internal service fund concerned with rendering service involving the consumption of supplies or the delivery of stores to other funds and activities, the inventories of supplies or stores are taken into consideration in computing billings to departments serviced.

Inventories can and should be taken into consideration when preparing budgets. A fund, such as a general fund, having departments that possess large inventories at year-end obviously has need for smaller appropriations for the coming year than it would if those departments had zero inventories.

SOLUTIONS TO EXERCISESE17-1 Multiple-Choice Questions on the General Fund [AICPA Adapted] 1. b

2. a

3. b

4. b

5. c

6. b

E17-2 Matching for General Fund Transactions [AICPA Adapted] 1. K

2. C

3. B

4. B

5. K

6. A

7. H

8. I

9. M

10. F

11. B

12. B

E17-3 Multiple-Choice Questions on Budgets, Expenditures, and Revenue [AICPA Adapted] 1. c

2. d

3. c

4. a

5. b

6. c

7. d

8. b

9. c

10. dE17-4 Multiple-Choice Questions on the General Fund 1. b

2. d

3. cThe balance in the ENCUMBRANCES CONTROL and the FUND BALANCE RESERVED FOR ENCUMBRANCES accounts is the same. Therefore, an excess of one account over the other indicates a recording error.

4. cThe following entry is made when a purchase order is approved:

ENCUMBRANCES CONTROL

BUDGETARY FUND BALANCE RESERVED FOR ENCUMBRANCES

5. bThe 60-day rule for property tax revenues requires that property taxes collected within 60 days after the end of the year are revenues of the preceding fiscal year. The entry to record the tax levy would be:

Property Taxes Receivable - Current 700,000

Allowance for Uncollectible Taxes

10,000

Revenue - Property Taxes 600,000

Deferred Revenue (reported as a liability

on the general fund balance sheet) 90,000

E17-4 (continued)

6. aUpon receipt of the order, Oak would record the following entries:

BUDGETARY FUND BALANCE RESERVED

FOR ENCUMBRANCES 5,000

ENCUMBRANCES CONTROL 5,000

Expenditures Control 4,950

Vouchers Payable 4,950

7. aJohnson would record the following entry:

ESTIMATED REVENUES CONTROL 9,000,000

ESTIMATED OTHER FINANCING SOURCE -

TRANSFER IN (Internal Service) 1,000,000


TRANSFER IN (Debt Service) 500,000

APPROPRIATIONS CONTROL XXXXXX

BUDGETARY FUND BALANCE UNRESERVED XXX

8. c

9. a

10. b

E17-5 Encumbrances at Year-Enda. Outstanding encumbrances lapse at year-end.

(1)Year-end entries:

BUDGETARY FUND BALANCE RESERVED FOR

ENCUMBRANCES 12,500

ENCUMBRANCES 12,500

Close remaining budgeted encumbrances.

Unreserved Fund Balance 12,500

Fund Balance Reserved for

Encumbrances 12,500

Reserve actual fund balance for

outstanding encumbrances at year-end.

(2)City Council accepts outstanding encumbrances:

Fund Balance Reserved for Encumbrances 12,500


Reverse prior-year encumbrance reserve.

ENCUMBRANCES 12,500


ENCUMBRANCES 12,500

Establish budgetary control over

encumbrances renewed from prior year.

(3) Equipment received:


ENCUMBRANCES 12,500

ENCUMBRANCES 12,500

Remove budgetary reserve for goods

received.

Expenditures 12,750


Record expenditure for goods received

at actual cost of $12,750.

E17-5 (continued)

b. Outstanding encumbrances are nonlapsing.

(1) Year-end entries:


ENCUMBRANCES 12,500

ENCUMBRANCES 12,500

Close remaining budgetary encumbrances.



Encumbrances 12,500

Reserve fund balance for outstanding

encumbrances.

(2) Date the encumbrances:


Encumbrances 12,500


Encumbrances - 20X1 12,500

Reclassify reserve from prior year.

(3) Equipment received:

Expenditures - 20X1 12,500

Expenditures - 20X2 250


Record actual expenditure for goods

received.

(4) Closing entry:




Close expenditures account for

prior year encumbrances.

Unreserved Fund Balance 250

Expenditures 250

Close expenditures for current year.

(Note: In entry (3), the excess of actual cost over the encumbered amount must be approved as part of 20X2's expenditures. Entry (3) records a debit to Expenditures - 20X2 which increases 20X2's expenditures. The expenditures for 20X2 are closed in a separate entry. If the actual cost was less than the encumbered amount, then the difference should be closed to Unreserved Fund Balance, although some governmental units have a policy of closing any difference between actual and encumbered amounts for prior year encumbrances to the current year's expenditures.)

E17-6 Accounting for Inventories of Office Suppliesa. Consumption method of accounting for inventories:

(1) Purchase of supplies:

August 8, 20X2

Expenditures 3,600


Acquire inventory of supplies.

(2) Entries at end of 20X2 fiscal year:

September 30, 20X2

Inventory of Supplies 2,800

Expenditures 2,800

Recognize ending inventory of supplies.


Fund Balance Reserved for Inventories 2,800

Establish fund reserve for ending

inventory.

Unreserved Fund Balance 800

Expenditures 800

Close expenditures account.


September 30, 20X3

Expenditures 2,800


Record expenditures for

inventories consumed.



Remove fund balance reserve

for inventories consumed.


Expenditures 2,800


E17-6 (continued)

b. Purchase method of accounting for inventories:

(1) Purchase of supplies:

August 8, 20X2

Expenditures 3,600


Acquire inventory of supplies.


September 30, 20X2





Expenditures 3,600



September 30, 20X3



Remove fund balance reserve

for inventories consumed.

E17-7 Accounting for Prepayments and Capital Assets1. Acquired three-year insurance policy:

September 1, 20X1

Expenditures 5,400


Record acquisition of

three-year insurance policy.

2. New furniture for the city council meeting room:

September 17, 20X1

ENCUMBRANCES 15,600



Encumber for purchase orders for new furniture.

October 1, 20X1


ENCUMBRANCES 15,600

ENCUMBRANCES 15,600

Reverse reserve for furniture received.

Expenditures 15,200


Receive furniture at actual cost.

3. Acquired supplies - consumption method used:

November 4, 20X1

Expenditures 1,800


Acquire supplies.

Closing entries:

December 31, 20X1


Expenditures 1,120




Inventories 1,120

Establish fund reserve for ending inventory.


Expenditures

21,280

Close expenditures account:

$ 5,400 Insurance Policy

15,200 Furniture

680 Supplies

$21,280 Total

E17-8 Computation of Revenues Reported on the Statement of Revenues,

Expenditures, and Changes in Fund Balance for the General Fund

Gilbert City

Revenue Reported by the General Fund

For the Year Ended June 30, 20X8

Property tax revenue $1,860,000

Interest revenue on advance 1,500

Grant revenue used to acquire computer equipment 235,000

Sales tax revenue 125,000

Liquor license revenue 66,000Total revenue reported $2,287,500Notes:

(1)The amount reported for property tax revenue, $1,860,000 is computed in the following way:

Levy $2,000,000

Less:

The allowance for uncollectible taxes($2,000,000 X .02) (40,000)

Property taxes expected to be collected after August 31,

20X8 - the 60 day rule for property tax collections -

report as deferred revenue at June 30, 20X8 (100,000)

Property tax revenue for year ended June 30, 20X8 $1,860,000(2)The receipt of $50,000 for the repayment of the advance is recorded in the following manner by the general fund:

Cash 51,500

Advance to Internal Service Fund

50,000

Interest revenue 1,500

(3)Collection of property taxes during the year ended June 30, 20X8, does not affect the recognition of revenue. The revenue was recognized at the levy date, not the collection date.

(4)Revenue recognition related to the State grant is based upon spending the grant to acquire computer equipment. Therefore, revenue from the State grant is $235,000, the amount of the grant expended.

(5)Revenue from the sales tax is the amount collected during the year ended June 30, 20X8, or $125,000. The additional sales taxes of $25,000 will be revenue of the next fiscal year when the taxes are received from the State and are available to pay for expenditures incurred in the next fiscal year.

(6)The borrowing of the $800,000 using the property tax levy as collateral represents a liability in the general fund. This amount is not revenue.

(7)The $30,000 received from a terminated debt service fund is reported

as an other financing source - transfer in, not revenue.

(8)The revenue from liquor licenses is the amount collected, not the amount expected to be collected. Therefore, revenue of $66,000 is recognized from the sale of liquor licenses for the year ended June 30, 20X8.E17-8 (continued)

(9)The $15,000 reimbursement is not reported as revenue in the general fund. Reimbursements are recorded as reductions in expenditures.

(10)The collection of the delinquent property taxes is not reported as revenue by the general fund for the year ended June 30, 20X8. The revenue associated with the delinquent property taxes was reported in the preceding fiscal year, because the property taxes were expected to be collected within 60 days of the end of the fiscal year.

E17-9Computation of Expenditures Reported on the Statement of Revenues,

Expenditures, and Changes in Fund Balance for the General Fund

Benson City

Amount Reported for Expenditures by the General Fund

For the Year Ended June 30, 20X8

Computer equipment acquisitions in September, 20X7 $ 202,000

Reimbursement to special revenue fund in May, 20X8 15,000

Use of city water during the fiscal year 12,000

Supplies acquisitions 35,000

Salaries and wages of general fund employees 900,000

Interest paid on loan from local bank 15,000

Employers pension contribution to pension trust 95,000

Lease payments 10,000 Total amount reported for expenditures $1,284,000Notes:

(1)The $150,000 transfer to the capital projects fund in March, 20X8, is reported as an other financing use - transfer out. Therefore, it should not be included in the amount reported for expenditures for the year ended June 30, 20X8.

(2)The amount paid for the computer equipment is the amount reported for expenditures. Therefore, $202,000 is included in expenditures for equipment, not the estimated amount of $200,000 that was recorded for the order(encumbrances).

(3)None of the $500,000 transferred to the internal service fund should be reported as expenditures. The $200,000 that must be repaid by the internal service fund should be accounted for as an advance (a receivable in the general fund), while the $300,000 that represented a permanent contribution should be accounted for as an other financing use - transfer out.

(4)The $15,000 reimbursement to the special revenue fund should be included in the expenditures of the general fund for the year ended June 30, 20X8.

E17-9 (continued)

(5)The $12,000 of billings from the water department should be accounted for as expenditures by the general fund. Billings for water usage constitute an interfund services provided and used transaction. Note that the amount paid by the general fund, $11,500, is not the correct amount of the expenditures. The correct amount is $12,000.

(6)The acquisition of supplies and the payment of salaries and wages by the general fund should be accounted for as expenditures. The entire cost of the supplies purchased should be reported as expenditures because the general fund uses the purchase method of accounting for supplies.

(7)The outstanding encumbrances at June 30, 20X8, are not included in expenditures. The outstanding encumbrances will be reported on the general fund balance sheet as a reservation of fund equity.

(8)The repayment of the principal of the bank loan is not an expenditure. However, the amount paid for interest, $15,000, should be included in expenditures for the year ended June 30, 20X8.

(9)The general funds $95,000 contribution to the citys pension trust should be included in expenditures of the general fund for the year ended June 30, 20X8. The employers contribution to a pension trust is an example of an interfund services provided or used transaction.

(10) The general funds lease payments should be included in the amount reported for expenditures for the year ended June 30, 20X8.

E17-10Closing Entries and Balance Sheet

a. Closing entries for the general fund:

(1) APPROPRIATIONS CONTROL 1,145,000

ESTIMATED OTHER FINANCING

USE - TRANSFER OUT 25,000

BUDGETARY FUND BALANCE UNRESERVED 30,000

ESTIMATED REVENUES CONTROL

1,200,000

Close budgetary accounts.

(2) BUDGETARY FUND BALANCE RESERVED FOR

ENCUMBRANCES 32,000

ENCUMBRANCES 32,000

Close remaining encumbrances by

reversing remaining budgetary balance.

(3) Unreserved Fund Balance 32,000


Encumbrances 32,000

Reserve fund balance for encumbrances

that lapse, but are expected to be

honored in 20X2.

(4) Property Tax Revenue

1,130,000

Miscellaneous Revenue 40,000

Expenditures 1,140,000


Close operating statement accounts.


Other Financing Use - Transfer Out 25,000

Close transfer out.

E17-10 (continued)

b. General fund balance sheet:

Lone Wolf

General Fund

Balance Sheet

December 31, 20X1

Assets

Cash

$ 90,000

Property Taxes Receivable - Delinquent $100,000

Less: Allowance for Uncollectibles - Delinquent (7,200) 92,800

Due from Other Funds 14,600Total Assets $ 197,400 Liabilities and Fund Balance

Vouchers Payable $ 65,000

Due to Other Funds 8,400

Fund Balance:

Reserved for Encumbrances $32,000

Unreserved 92,000 124,000Total Liabilities and Fund Balance $ 197,400E17-11Statement of Revenues, Expenditures, and Changes in Fund Balance Lone Wolf

General Fund

Statement of Revenues, Expenditures, and Changes

in Fund Balance

For the Fiscal Year Ended December 31, 20X1

Revenue:

Property Taxes

$1,130,000

Miscellaneous

40,000 $1,170,000

Expenditures

1,140,000 Excess of Revenue over Expenditures $ 30,000

Other Financing Sources (Uses):

Transfer Out

(25,000)

Net Change in Fund Balance $ 5,000

Fund Balance, January 1, 20X1 119,000 Fund Balance, December 31, 20X1 $ 124,000

E17-12 Matching Questions Involving Interfund Activities in the General

Fund 1. B

2. C

3. C

4. C

5. C

6. B

7. A

8. D

9. A

10. B

SOLUTIONS TO PROBLEMSP17-13 General Fund Entries [AICPA Adapted] (1) ESTIMATED REVENUES CONTROL 2,000,000

APPROPRIATIONS CONTROL 1,940,000


Record the budget.

(2) Taxes Receivable 1,870,000

Allowance for Uncollectible Taxes 10,000

Property Tax Revenue 1,860,000

Record the property tax levy.

(3) Allowance for Uncollectible Taxes 8,000

Taxes Receivable 8,000

Write off uncollectible

taxes receivable.

(4) Cash 1,820,000

Taxes Receivable 1,820,000

Record property tax collections.

(5) ENCUMBRANCES 1,070,000


FOR ENCUMBRANCES 1,070,000

Record purchase commitments.


ENCUMBRANCES 1,000,000


Reverse for purchase orders received.

(7) Expenditures 1,840,000

Vouchers Payable 1,840,000

Record actual expenditures.

(8) Vouchers Payable 1,852,000

Cash 1,852,000

Record payment of vouchers

during period.






ENCUMBRANCES 70,000

ENCUMBRANCES 70,000

Close remaining encumbrances by

reversing remaining budgetary balance.

P17-13 (continued)



Encumbrances 70,000


purchase commitments.

(12) Property Tax Revenue 1,860,000




P17-14 General Fund Entries 1. Entry to record operating budget for general fund:

ESTIMATED REVENUES CONTROL 925,000


TRANSFER IN 75,000

APPROPRIATIONS CONTROL 960,000

ESTIMATED OTHER FINANCING USE -

TRANSFER OUT 25,000


2. Entries to record lapsed encumbrances from the preceding

year which were included in current appropriations:






3. Entry to record property tax levy:


Allowance for Uncollectible

Taxes - Current

16,000

Revenue - Property Tax 800,000

P17-14 (Continued)

4. Entry to record receipt of cash from property tax collections:

Cash 805,000


Entry to record adjustment to the allowance account:

Allowance for Uncollectible Taxes

- Current 10,000

Revenue - Property Tax 10,000

Entry to record reclassification of property taxes receivable:

Property Taxes Receivable - Delinquent 11,000

Allowance for Uncollectible Taxes Current 6,000


Taxes - Delinquent

6,000


5. Entry to record receipt of sales taxes and other revenue:

Cash 126,000

Revenue - Sales Tax 102,000

Revenue - Licenses and Permits 24,000

6. Entry to record interfund receivable for transfer in:

Due from Special Revenue Fund 70,000

Other Financing Source - Transfer

In from Special Revenue Fund 70,000

Entry to record cash transferred:

Cash 70,000

Due from Special Revenue Fund

70,000

Entry to record interfund payable for transfer out:

Other Financing Use - Transfer

Out to Internal Service Fund 25,000

Due to Internal Service Fund 25,000

Entry to record cash transferred:

Due to Internal Service Fund 25,000

Cash

25,000

P17-14 (Continued)

7. Entry to record equipment ordered:


BUDGETARY FUND BALANCE

RESERVED FOR ENCUMBRANCES 50,000

Entries to record equipment received and vouchers paid:




Expenditures 50,500



Cash 50,500

8. Entry to record loan on January 1, 20X6:

Due from Enterprise Fund 20,000

Cash 20,000

Entry to record receipt of loan and interest on June 30, 20X6:

Cash 20,600

Revenue - Interest 600


Interest = $20,000 x .06 x 1/2 = $600

9. Entry to record billing:

Expenditures 500

Due to Internal Service Fund 500

Entry to record payment:

Due to Internal Service Fund 500

Cash 500

P17-15 General Fund Entries [AICPA Adapted]

1. ESTIMATED REVENUES CONTROL 3,000,000

APPROPRIATIONS CONTROL

2,980,000


Record the budget.

Taxes Receivable 2,870,000


Revenue from Taxes

2,800,000

Record tax levy.

Cash 2,810,000

Taxes Receivable

2,810,000

Record tax collection.


Taxes Receivable 40,000

Record write-off of uncollectible taxes:

July 1, 20X1, taxes receivable balance $ 150,000

20X2 tax levy 2,870,000

Less: Taxes collected (2,810,000)

Taxes receivable final balance (170,000)

Taxes written off as uncollectible $ 40,000 Cash 130,000

Miscellaneous Revenue

130,000

Collect miscellaneous revenue.

2. Fund Balance Reserved for Encumbrances 60,000

Unreserved Fund Balance

60,000

Reverse prior reserve which has

been renewed.

ENCUMBRANCES 60,000



Renew encumbrances from prior period.




Record encumbrances.

P17-15 (Continued)

3. Expenditures 142,000


Record liability to other funds

for services received.

4. BUDGETARY FUND BALANCE RESERVED



Reverse encumbrances for items

received.


Vouchers Payable

2,700,000

Record expenditures.


FOR ENCUMBRANCES

60,000

ENCUMBRANCES 60,000

Reverse reserve for encumbrances.

Expenditures (Prior Period)

58,000


Actual expenditure for goods

received.



Record approval for payment to

other funds.

Vouchers Payable

2,640,000

Cash 2,640,000

Record voucher payments.

5. ENCUMBRANCES 91,000



Record May 10 encumbrance.

P17-16 General Fund Closing Entries and Statementsa. Adjusting entries:

(1) Inventory of Supplies 8,000

Expenditures 8,000

Establish ending inventory of supplies.



Inventories 8,000

Reserve fund balance for supplies

inventory.

Closing entries:







ENCUMBRANCES 23,000

ENCUMBRANCES

23,000

Close remaining encumbrances.



Encumbrances 23,000

Reserve fund balance for encumbrances

that lapse, but may be renewed.


Grant Revenue 40,000


Expenditures

1,377,000




P17-16 (continued)

b. Quincy

General Fund

Balance Sheet

June 30, 20X2

Assets

Cash $ 100,000

Property Taxes Receivable - Delinquent $ 108,000

Less: Allowance for Uncollectibles - Delinquent (8,400)

99,600

Due from Data Processing Fund 10,000

Inventory of Supplies 8,000Total Assets $ 217,600 Liabilities and Fund Balance


Due to Printing Service Fund 2,600

Fund Balance:

Reserved for Inventories $ 8,000

Reserved for Encumbrances 23,000

Unreserved Fund Balance 140,000 171,000Total Liabilities and Fund Balance $ 217,600c. Quincy

General Fund


in Fund Balance

For Fiscal Year Ended June 30, 20X2

Revenue:

Property Taxes $1,390,000

Grants 40,000

Miscellaneous 32,000 $1,462,000

Expenditures 1,377,000Excess of Revenue over Expenditures $ 85,000


Transfer Out (50,000)

Net Change in Fund Balance $ 35,000

Fund Balance, July 1, 20X1 136,000Fund Balance, June 30, 20X2 $ 171,000

P17-17 General Fund Entries and Statementsa. Budget and transaction entries for 20X2:

1. & 2.

ESTIMATED REVENUES CONTROL

1,420,500

APPROPRIATIONS CONTROL

1,356,000


USE - TRANSFER OUT TO

INTERNAL SERVICE FUND 25,000


Record budget.

Property Taxes Receivable - Current

1,300,000

Allowance for Uncollectibles - Current

19,500

Property Tax Revenue

1,280,500

Record levy.




Reclassify reserve for prior year.

3. Cash

1,314,000

Property Taxes Receivable - Current 1,245,000


Record tax collections.

Cash 166,000

Grants Revenue 90,000



In from Capital Projects Fund 30,000

Other cash receipts.

Allowance for Uncollectibles - Delinquent 8,000

Property Tax Revenue 3,000


Write off remaining delinquent taxes

from 20X1.

Allowance for Uncollectibles - Current 12,000


Reduce current allowance to $7,500.





Remainder of unpaid 20X2 property taxes

reclassified as delinquent.

P17-17 (continued)

4. ENCUMBRANCES 1,336,000


FOR ENCUMBRANCES

1,336,000

Issue purchase orders.


ENCUMBRANCES

1,216,000

ENCUMBRANCES

1,216,000

Receive ordered items:

$1,216,000 = $1,336,000 - $120,000 outstanding


Expenditures - (20X2) 2,000

Vouchers payable 20,000

Actual cost for prior year's

encumbrance is $20,000. The approved

excess of $2,000 is charged to current

year's expenditures.

Expenditures - (20X2) 1,220,000



Actual expenditures, including

beginning inventory of supplies:

$1,220,000 = $1,240,000 - $20,000 prior years


Unreserved Fund Balance

11,000

Eliminate present reserve for

inventories. (Will properly

re-establish in adjusting

entry process.)

Vouchers payable

1,227,000

Cash

1,227,000

Pay vouchers.

5.Other Financing Use Transfer

Out to Internal Service Fund

25,000

Due from Computer Center Fund

20,000

Cash

45,000

Other cash payments.

P17-17 (continued)

b. Ruby Valley

General Fund

Preadjusting Trial Balance

June 30, 20X2

Debit Credit Cash $ 311,000

Property Tax Receivable - Delinquent 55,000

Allowance for Uncollectibles - Delinquent $ 7,500

Due from Computer Center Fund 20,000

Inventory of Supplies -0-


Fund Balance Reserved for Inventories -0-

Fund Balance Reserved for Encumbrances - 20X1 18,000













ESTIMATED OTHER FINANCING USES -

TRANSFER OUT TO INTERNAL SERVICE FUND 25,000

ENCUMBRANCES 120,000

BUDGETARY FUND BALANCE RESERVED FOR ENCUMBRANCES 120,000

BUDGETARY FUND BALANCE UNRESERVED 39,500 $3,191,500 $3,191,500P17-17 (continued)

c. Adjusting entries:

(1) Inventory of Supplies 6,700

Expenditures 6,700

Establish ending supplies inventory.



Inventories 6,700

Reserve for ending supplies inventory.

Closing entries:


ESTIMATED OTHER FINANCING USE -

TRANSFER OUT TO INTERNAL SERVICE FUND 25,000










Encumbrances 120,000

Reserve fund balance for nonlapsing

encumbrances.

(4) Fund Balance Reserved for



Close prior year's expenditures against

prior year's reserve. Excess of actual

cost of $20,000 over encumbrance of

$18,000 is charged to current year's

(20X2) expenditures.







P17-17 (continued)

(6) Other Financing Source - Transfer





Close interfund transfers.

d. Ruby Valley

General Fund

Balance Sheet

June 30, 20X2

Assets

Cash $311,000

Property Taxes Receivable - Delinquent $55,000

Less: Allowance for

Uncollectibles - Delinquent (7,500) 47,500

Due from Computer Center Fund 20,000

Inventory of Supplies

6,700Total Assets $385,200 Liabilities and Fund Balance


Fund Balance:

Reserved for Inventories $ 6,700

Reserved for Encumbrances 120,000

Unreserved Fund Balance 214,500 341,200Total Liabilities and Fund Balance $385,200P17-17 (continued)

e.

Ruby Valley

General Fund


in Fund Balance

For Fiscal Year Ended June 30, 20X2

Actual

Revenue:


Grants 90,000

Miscellaneous 46,000Total Revenues $1,425,500Expenditures:

Chargeable to 20X2 Appropriations:

Current (Schedule A) $1,170,300

Capital Outlay 45,000

Total Expenditures of 20X2 Appropriations $1,215,300

Chargeable to 20X1 Appropriations:

Current (20X1 encumbrance) 18,000Total Expenditures $1,233,300Excess of Revenue over Expenditures $ 192,200


Transfer Out $ (25,000)

Transfer In 30,000 5,000Change in Fund Balance $ 197,200

Fund Balance, July 1, 20X1 144,000Fund Balance, June 30, 20X2 $ 341,200Schedule A:

Actual expenditures:

Preadjusting trial balance, expenditures $1,222,000

Inventory adjustment (6,700)

Capital expenditure

outlay for elevator (45,000)

Actual current operating expenditures $1,170,300

P17-18 General Fund Entries and Statementsa. Entries for 20X2 budget and transactions:

1. ESTIMATED REVENUES CONTROL 1,877,000


ESTIMATED OTHER FINANCIAL


Record budget.

ENCUMBRANCES 21,000



Renew encumbrances from prior period.



Reverse reserve for renewed encumbrances.

Property Tax Receivable - Current 1,600,000



Record property tax levy.

2. Cash 1,590,000

Property Taxes Receivable - Current 1,507,000


Collect property taxes.




Write off remaining delinquent property

taxes.





Reclassify remainder of uncollected

20X2 property taxes.

Cash 333,000

Sales Tax Revenue 284,000


Due to Motor Pool Fund 10,000

Other cash receipts.

P17-18 (continued)

3. ENCUMBRANCES 1,800,000



Record purchase orders.




Reverse reserve for items received.



Actual expenditures for items

received.


Cash 1,793,000

Vouchers paid.

4. Due from Central Stores Fund 13,000


Cash 50,000

Other cash payments and transfer.

P17-18 (continued)

b. Pine Ridge

General Fund

Preclosing Trial Balance

December 31, 20X2

Debit Credit Cash $ 191,000

Property Tax Receivable - Delinquent 93,000

Allowance for Uncollectibles - Delinquent $ 16,000

Due from Central Stores Fund 13,000











ESTIMATED OTHER FINANCING USE - TRANSFER OUT 37,000

ENCUMBRANCES 48,000


FOR ENCUMBRANCES 48,000 $4,047,000 $4,047,000P17-18 (continued)

c. Closing entries:








ENCUMBRANCES 48,000




Encumbrances 48,000


purchase orders.








d. Pine Ridge

General Fund

Balance Sheet

December 31, 20X2

Assets

Cash $ 191,000

Property Tax Receivables - Delinquent $ 93,000

Less: Allowance for Uncollectibles - Delinquent (16,000) 77,000

Due from Central Stores Fund 13,000Total Assets $281,000 Liabilities and Fund Balance



Fund Balance:

Reserved for Encumbrances $ 48,000

Unreserved Fund Balance 197,000 245,000Total Liabilities and Fund Balance $281,000

P17-18 (continued)

e. Pine Ridge

General Fund


in Fund Balance

For Fiscal Year Ended December 31, 20X2 Revenue:


Sales Taxes 284,000

Miscellaneous 39,000 Total Revenue $1,909,000 Expenditures:

Current $1,746,000

Capital Outlay 42,000 Total Expenditures $1,788,000 Excess of Revenue over Expenditures $ 121,000


Transfer Out (37,000)

Change in Fund Balance $ 84,000

Fund Balance, January 1, 20X2 161,000 Fund Balance, December 31, 20X2 $ 245,000P17-19 General Fund Entries ESTIMATED REVENUE - PROPERTY TAXES 4,500,000

ESTIMATED REVENUE - LICENSES AND PERMITS 300,000

ESTIMATED REVENUE - FINES 200,000

APPROPRIATIONS - GENERAL GOVERNMENT 1,500,000

APPROPRIATIONS - POLICE SERVICES 1,200,000

APPROPRIATIONS - FIRE DEPARTMENT SERVICES 900,000

APPROPRIATIONS - PUBLIC WORKS SERVICES 800,000

APPROPRIATIONS - FIRE ENGINES 400,000


Record the budget.

1. Property Taxes Receivable - Current 4,650,000

Allowance for

Uncollectibles - Current 150,000


Record property tax levy.

2. Cash 3,900,000

Property Taxes Receivable 3,900,000

Record collection of taxes.




Allowance for

Uncollectibles - Delinquent 150,000

Record reclassification of taxes.

3. Cash 300,000

Notes Payable 300,000

Record issue of tax anticipation notes.

4. Cash 485,000

Revenue - Licenses and Permits 270,000

Revenue - Fines 200,000

Revenue - Sale of Fixed Assets 15,000

Record other cash collections.

P17-19 (continued)

5. ENCUMBRANCES - GENERAL GOVERNMENT 1,050,000

ENCUMBRANCES - POLICE SERVICES 300,000

ENCUMBRANCES - FIRE DEPARTMENT SERVICES 150,000

ENCUMBRANCES - PUBLIC WORK SERVICES 250,000

ENCUMBRANCES - FIRE ENGINES 400,000



Record encumbrances issued.



ENCUMBRANCES - GENERAL GOVERNMENT 990,000

ENCUMBRANCES - POLICE SERVICES 270,000

ENCUMBRANCES - FIRE DEPARTMENT SERVICES 135,000

ENCUMBRANCES - PUBLIC WORK SERVICES 240,000

ENCUMBRANCES - FIRE ENGINES 400,000

Remove encumbrances for orders received.

6. Expenditures - General Government 1,440,000

Expenditures - Police Services 1,155,000

Expenditures - Fire Department Services 870,000

Expenditures - Public Work Services 700,000

Expenditures - Fire Engines 400,000


Recognize expenditures for orders received.

7. Vouchers Payable 4,600,000

Cash 4,600,000

Pay approved vouchers.

P17-20 General Fund Entries [AICPA Adapted] 1. Budget adopted:

ESTIMATED REVENUE - TAXES 220,000

ESTIMATED REVENUE - FINES, FORFEITS,

AND PENALTIES 80,000

ESTIMATED REVENUE - MISCELLANEOUS 100,000

ESTIMATED OTHER FINANCING SOURCES -

PROCEEDS OF BOND ISSUE 200,000

APPROPRIATIONS - PROGRAM OPERATIONS 360,000

APPROPRIATIONS - GENERAL ADMINISTRATION 120,000

APPROPRIATIONS - CAPITAL OUTLAYS 80,000

ESTIMATED OTHER FINANCING USE - TRANSFER

OUT TO CAPITAL PROJECTS FUND 20,000


Record budget.




Reclassify reserve from prior year.

2. Taxes Receivable - Current 230,000


Taxes - Current 9,200

Revenue - Taxes 220,800

Record tax levy:

$230,000 = ($220,800/.96)

3. ENCUMBRANCES 316,000



Record encumbrance for ordered goods.

4. Unreserved Fund Balance 20,000

Fund Balance Designated for

Capital Outlays 20,000

Designation of fund balance.

5. Cash 664,000

Taxes Receivable - Delinquent 38,000

Taxes Receivable - Current 226,000

Expenditures - Capital Outlay 4,000

Revenue - Fines, Forfeits, and Penalties 88,000

Revenue - Miscellaneous 90,000

Other Financing Source - Proceeds of

Bond Issue 200,000


In from Discontinued Fund 18,000

Record cash collections and transfers.

P17-20 (continued)

6. Allowance for Uncollectible Accounts Current 6,200

Revenue - Taxes 6,200

Adjust current allowance account.


Accounts - Delinquent 8,000

Taxes Receivable - Delinquent 8,000

Write off remaining delinquent

taxes receivable

7. BUDGETARY FUND BALANCE RESERVED FOR

ENCUMBRANCES

290,000

ENCUMBRANCES

290,000

Reverse budgetary encumbrance for orders

received: ($302,000 - $12,000)

Expenditures - 20X2 - Program Operations 12,000

Expenditures - Program Operations 154,000

Expenditures - General Administration 80,000


Vouchers Payable

308,000

Record expenditures for orders received.

8. Expenditures - Program Operations 188,000

Expenditures - General Administration 38,000



Out to Capital Projects Fund 20,000

Vouchers Payable

244,000

Due to Capital Projects Fund 20,000

Record additional vouchers.

9. Taxes Receivable - Current 2,000

Deferred Revenue - Taxes 2,000

Record credit for overpayment.

10. Vouchers Payable 580,000

Cash

580,000

Pay approved vouchers.

11. Fund Balance Reserved for Stores

Inventory 6,000

Stores Inventory - Program Operations 6,000

Record reduction in stores inventory.

P17-21 General Fund Entries and Balance Sheet

a.

1. ESTIMATED REVENUES CONTROL

290,000


SOURCE - TRANSFER IN 20,000

APPROPRIATIONS CONTROL 285,000




Record the operating budget

for fiscal 20X6.

2. Fund Balance Reserved for Encumbrances 16,000





Record the encumbrances that lapsed at

June 30, 20X5, which were included in

20X6 appropriations.

3. Property Taxes Receivable - Current 220,000

Allowance for Uncollectible Taxes -

Current 8,800


Record property tax levy for fiscal 20X6.

P17-21 (continued)

4. Cash 320,000



Revenue - State Grants 50,000

Revenue - Sales Taxes 17,500

Revenue - Fines, Licenses, and Permits 11,000




Revenue - Interest 500

Record cash collections in the general

fund for fiscal 20X6.

Allowance for Uncollectible Property

Taxes - Delinquent 7,000


Write-off uncollectible property taxes

from fiscal 20X5.


Allowance for Uncollectible Taxes - Current 8,800



Taxes - Delinquent 6,000


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